tv Nightly Business Report PBS April 30, 2010 6:30pm-7:00pm EDT
>> i continue to believe that domestic oil production is an important part of our overall strategy for energy security, but i've always said it must be done responsibly, for the safety of our workers and our environment. the local economies and livelihoods of the people of the gulf coast as well as the ecology of the region are at stake. >> tom: president obama rallies those responding to the big gulf of mexico oil spill. and that leak is looking worse than many thought. >> suzanne: now some experts say 25,000 barrels a day could be leaking from the sunken rig. we'll get the latest from the scene. you're watching "nightly business report" for friday, april 30. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: good evening. susie gharib is on assignment in omaha at berkshire hathaway's annual meeting. i'm joined by suzanne pratt. that oil slick in the gulf of mexico is now the size of the island of jamaica, getting bigger by the hour and washing ashore in louisiana. some industry experts estimate the spill could be leaking 25,000 barrels a day-- five times what the government projected. >> suzanne: tom, if it isn't contained, it could become the
worst oil spill in u.s. history- - endangering local economies, the livelihoods of people on the gulf coast and the fragile ecology of the region. >> tom: b.p. says it takes full responsibility, and will pay legitimate claims for damages from the disaster, as well as costs for the cleanup. the states of alabama and florida have declared a state of emergency, anticipating the oil spill will reach their shores. and louisiana governor bobby jindal wants the national guard deployed to his state's coastline for 90 days. he's concerned b.p.'s resources are not enough: >> the three challenges we face are stopping the leak, protecting our coast, preparation for a swift clean up of our impacted areas. we've also been working with local officials to assess their needs to help them request resources from b.p. and the coast guard. >> suzanne: earlier today i spoke with "pbs newshour" correspondent tom bearden, who has been covering the oil spill story from venice, louisiana. he spent time today on a boat in the gulf of mexico, and i began by asking him what he saw.
>> very rough water and a lot of orange booms that are being pushed up against the beach. the water is so rough it is flowing right over the top of those booms. they're designed to be barriers, to keep oil out. but when the water goes over the top, so does the oil. >> are you seeing evidence that the oil is coming ashore? did you see that today? >> it is a very light sheen. it is not like some of the other oil spills you've seen where the crude is very thick. this is called sweet, like crude, but it is still an oil slick and of obviously very dangerous. >> suzette: are you seeing evidence of damage to fish and plants along the shore line already? >> we haven't seen that ourselves, but there are reports coming out of this area that some fish have been oiled, as the phrase goes, offshore and are being treated in a facility not very far from here. clearly there are expectations that there will be more damage to wildlife and considerable damage to fisheries if
this oil spill goes further up into the estuaries where the fish breed and the oysters grow. >> suzette: what is the attitude of the fishermen, the locals there? is there a sense that enough is being done at this time? >> well, their first reaction is fright. they're very concerned that the damage to their fisheries will persist for years. we heard that from the president of placaman's parish, the political organization in this area. but the fishermen also are concerned they don't see a great deal of activity. there is some loading of the boom material in small boats in a marina just down the road here. but they think there should be a lot more activity. they're saying it is not happening fast enough and a lot more booms need to be out there, especially when the water is as rough as it is. they think there should be multiple layers of booms. >> suzette: are we talking about activity from b.p. or activity from the government? exactly from where? >> from all of that. b.p. is in char charge of the
entire cleanup under the supervision of the coast guard. as you probably know, the department of defense is sending in new reenforcements, more manpower, aircraft, and so forth. but it is activity from the entire edifice that is in charge of this entire operation. they don't think there is enough urgency. >> suzette: let's leave it there, tom. thank you so much for joining us this evening. >> my pleasure. >> suzette: my guest, tom bearden of the pbs newshour. >> tom: here are the stories in tonight's n.b.r. newswheel: goldman sachs took the shine off of stocks. the dow fell 158 points. the nasdaq lost 50 and the s&p 500 was down 20. the drop came on heavier big board volume. nasdaq volume tapered off from yesterday's pace. goldman sachs shares tumbled 9% on word it's the target of a criminal probe. the justice department is looking at goldman's role in the mortgage backed securities market. the investment bank already faces civil fraud charges filed by the s.e.c.
goldman says it's not surprised by the criminal investigation given the focus on the firm. if you don't have a signed home contract in hand by midnight tonight you've missed out on the tax credit for new home buyers and repeat buyers. the credit worth up to $8,000 expires tonight. deals making the cut have until june 30 to close. >> tom: still ahead, working on the railroad and working for warren. we talk with burlington northern c.e.o. matthew rose about his new boss warren buffett. >> suzanne: more signs the u.s. economic recovery is gaining steam: the latest reading on g.d.p. shows the economy grew at a rate of 3.2% in the first quarter. it is the third straight quarter of growth and one area showing improvement is the services sector. as scott gurvey explains, for people looking for jobs, things could be looking good. >> thank you. >> reporter: business is up at fre-jean salon and spa, where owner jean sopinko has noticed the difference. >> when i check my numbers from
last year to this year, we've definitely increased, which i'm extremely grateful for. >> reporter: the increase is not only in the number of appointments, but also in the number of services performed on each visit. with that bump in business, fra- jean has added another stylist. the growth at fra-jean illustrates the growth in services seen in today's g.d.p. report. the manufacturing sector has been leading the recovery. but services make up nearly 90% of the economy, including the majority of small businesses. jonathan basile of credit suisse say those businesses are the key to creating jobs, and those jobs are critical if the economic recovery is to continue. >> i think services are on the mend. i think the service sector is probably also on the rise as we go into the second quarter. as we get into more sustainable gains in jobs and income we'll probably see that spread through more spending and more activity throughout the service sector.
>> reporter: the increase in service sector activity came in spite of declines in construction and state and local government operations. weakness in construction is expected to continue. but construction is a relatively small part of the economy. maury harris of u.b.s. believes the problems with state and local government cutbacks are more significant and should be addressed by more federal aid. >> the reality is if we don't keep pumping the money in to the state and local governments you're going to see firemen laid off, policemen laid off, your kids are going to go back to fifty teacher classrooms. i don't think the most conservative congressman wants to take responsibility for that. >> reporter: the government cuts, of course, are a result of lower tax revenue. but if the sales at fra-jean continue to increase, the taxes it collects should increase too. >> everyone wants to look nice. and everyone wants to feel good. if you do nothing more, you need a good haircut.
>> reporter: and if the service sector creates some more jobs, you'll need that haircut to meet with job recruiters. scott gurvey, "nightly business report," new york. >> suzanne: we have more coverage of today's g.d.p. report on the web. white house economic advisor christina romer talks with n.b.r. washington bureau chief darren gersh about job growth and the economic impact of the oil spill. you can watch the interview on our web site: nbronpbs.org.
>> tom: for the first time in two months, two of the major indices finished lower on the week. let's take a look at the market focus. the week saw goldman sachs, the oil spill and the return of volatility for stock holders. the dow industrials is one of them, dropping one-point-eight percent thanks to the selling tuesday and today. the nasdaq also dropped on a weekly basis for the first time in two months, down 2.7%. the s&p 500 fell 2.5% on the week. for april, the major indices put in their third straight month of gains. consumer focused stocks led the way in april, while health care was the worst performing sector. here are the monthly performances for the health care and consumer discretionary exchange traded funds. the almost 4% move down for health care came the same month the health care reform bill became law. the last couple of weeks of
april have been cruel to goldman sachs shareholders, with the stock taking another big hit today. goldman stock was down about 15% in april, but most of that has happened since the securities and exchange commission filed its civil fraud charges. now, the firm is the focus of a criminal fraud investigation. the preliminary probe took 9% out of the stock today. the other big story today continues to be the oil spill we reported on earlier in the program. transocean is the owner of the rig that sunk, leading to the spill. shares of r.i.g. continue seeing huge volume and big selling. the stock is at its lowest price since july and has lost a fifth of their value since the fatal blow out on the oil platform 10 days ago. b.p., the firm that was operating the offshore platform, saw its stock drop less than 1% today. but it is down more than 13% since the accident. for mutual fund investors, the vanguard energy fund has the largest exposure to b.p. among the top 100 biggest stock funds. franklin's mutual shares fund has the biggest exposure to transocean with 1.4% of the fund in rig. and for goldman sachs it's lord abbett affiliated fund with just
over 3% of the fund in goldman. it's important to note that even though these funds have the biggest percentage of their total portfolios in those stocks, none of the stocks are any of those funds biggest holdings. one more note from the energy sector tonight. tech stocks took a hit today, led by m.e.m.c. electronic materials and its unique ticker that stands for wafer, which is what it sells to semiconductor makers. a disappointing earnings report sent the stock reeling more than 18%, and on five times its usual volume. the stock is at its lowest price since early march. technology security firm mcafee also saw a double digit drop on heavy volume. first quarter profits fell 30% and had a weak second quarter outlook. counting pennies and renting dvds and a dollar a day is paying off at coinstar. this is the company that runs those change counting machines in grocery stores as well as the red box dvd kiosks. it was a big quarter for coinstar with earnings easily topping expectations. the results were driven by its
growing dvd business. the stock took off on this news. and today's 16% rally is enough to put the stock at a new all- time high. even those there was the return of volatility this week, we saw a trio of new stocks hit the tape. p.a.a. nat gas storage is the first limited partnership to go public in two years. alpha and omega semiconductor makes chips for power supplies in notebook computers and flat panel tvs. it started trading at $18 and convio makes software helping nonprofit groups find donors. its initial price was $10 per share. and that's tonight's market focus.
>> suzanne: as we mentioned earlier susie gharib is in omaha tonight for berkshire hathaway's annual meeting. we'll see her report on monday night. before she left, she sat down with one of warren buffet's newest employees: matthew rose. he's c.e.o. of burlington northern sante fe-- the railroad buffett bought three months ago. it's like to have buffett ashat your boss? >> you know, it has just been great. it is fabulous. he just gives me free rein, and, you know, he said just keep doing what you're doing. and, again, long-term focus and don't worry about the small stuff and everything will be fine. >> susie: has he been checking up on you? does he call you? >> he calls. i call him maybe every couple of weeks. i would not characterize
it as a checkup. you know, i think when you make the size of investment that he made, which was at the end of the day with debt, about $44 billion, he was convinced over a number of years that we had a leadership team that knew what they were doing, how to run a company. i believe that that's the trust he has in us. and we're going to work hard to retain that trust. >> susie: do you feel that you need to check in with him? if you've got to get his okay on a business issue? >> not so much an okay. but, you know, i called him after the first three or four weeks, and i said, warren, you know, what do i need to send you? this is weird. i would usually talk to my board members, you know, several of them each month. and he said, you don't need to send me anything. just keep running the business. you'll learn that this is a great way to run a company. and when you need my help or something is going to surprise you that would
surprise me, let me know. otherwise just focus on the business. >> susie: you know mr. buffett said in his annual letter that just came out, he let's his managers operate on their own as long as they get the job done. are you saying he really does stay out of the way? >> he really does. there is just no doubt about it. >> susie: so nothing really changed. you're still headquartered in forth worth, texas, and you've got 40,000 employees. nobody is going to lose their job. nothing has changed? >> we had one person that left because of the transaction. that was it. nothing has changed. >> susie: let's talk a little bit about the merger. how tough of a negotiator was warren buffett? >> you know him. you've met him. he's a very subtle personality. very direct, very specific. as far as the negotiation, it literally took very little time. he is not represented by an investment banker. >> susie: i understand you two agreed after like a 15-minute meeting.
is warren buffett really that quick and decisive? >> the 15-minute meeting has been a little miscarrized. 10 of those was talking about football. and so now we're down to five minutes. and that was him laying out the deal points. >> susie: why do you think mr. buffett is so successful as a manager? >> i think he has an incredible sense of deep value in businesses. it truly is just amazing, his knowledge of our company. we're just one of many. we are one of his largest -- we're his largest acquisition, but his innate sense to understand our business from his position is, quite frankly, incredibly impressive. >> susie: so what have you learned from the man who is the most respected c.e.o. in the country? >> in one word, it would be his humbleness. i've seen him around, whether it is my management team or i've seen him around when we've been on the railroad together, in an airport
together. he always has time for people. and i've just -- i really appreciate his ability to relate to the spectrum of individuals. >> susie: matt, mr. buffett has described you as a fabulous manager, and that was said in the context where he was talking about succession. if you were asked to run berkshire, how would you feel about that? >> i'm getting older every day, and i'm really focused on b.n.s.f. >> suzanne: on monday, we'll hear from the big boss himself-- warren buffett. this weekend he's hosting berkshire hathaway's annual meeting in omaha, nebraska. susie will have a complete wrap up, plus her interview with buffett. also next week, the latest reports on construction spending, factory orders and auto sales. and next friday we'll see the april employment numbers. it looks like the ghost of mortgages past is coming back to haunt countrywide and its owner bank of america. a new york judge says bond
insurer m.b.i.a. can sue bank of america for fraud allegedly committed by countrywide in 2005 through 2007. countrywide was bought by b. of a. in 2008, after imploding in the subprime mortgage meltdown. the bank says it shouldn't be held responsible for countrywide's problems before the deal. the judge disagreed. >> tom: cell phones are ringing up soaring sales, thanks to a recovering economy, and new smartphones. manufacturers shipped almost 300 million phones in the first quarter of the year. that's up 22% from the same period last year. one of the big beneficiaries is research is blackberry's research in motion, which for the first time is now one of the top five biggest phonemakers.
the economic rebound has just begun and the stock market has more room to run. so says tonight's market monitor. he's james paulsen, chief investment strategist at wells capital management. he joins us from minneapolis. >> tom: welcome to "nightly business report," jim. >> good to be here, tom. >> tom: we saw the first quarter gross domestic product growth. what do you anticipate for the rest of the year? >> we've had three solid quarters of growth, and i think it is going to continue to accelerate as we move through the year. i think we're going to get a further boost to consumer spending, even though it was pretty good in the first quarter
because we're just now starting to create jobs. that means we're going to continue to accelerate income growths in future quarters. and with the profit reports and also stock prices going up, i think business confidence is going to increase a lot in the second half, and they're going to start to have more capital spending. those two areas, i think, are going to continue to accelerate growth as we move through the year. >> tom: jim, is it your sense, however, that the stock market is reflecting that kind of anticipated growth, not only in profits, but also in jobs? >> i don't think entirely yet. it could be a little ahead of itself short-term. but i think one of the big things that could lift the stock market further is if we discredit the idea that we're in a subpar growing economy. i think we're now in a sustainable recovery, and it has helped lift the market to around 1200. i think as we go along, we're going to come to the conclusion that this is not only sustainable, but it is a very average, if not above average growth economy and it could give another leg to this stock market.
>> tom: you've got a couple of ideas that could add another leg. first i want to get to some areas you're advising clients to lighten up. we're going to look at that exchange traded fund that follows this x. l.y.. and to lighten up on small caps, i.w.m., the ticker symbol on that. what makes you begin to pull some money off of the table for these areas? >> i like the economically sensitive areas, which both of those are. but some of them have really done well. these two sectors, small caps, and the consumer discretionary stocks have done so well, i'm going to take a little off the table and go under weight in those areas. if they pull back, they may be interesting again. even though the fundamentals are good there, the stocks are more than reflected stort term. >> tom: that is one area you saw prices run ahead, the fundamentals. >> absolutely. >> tom: e.e.m.is the
ticker symbol following that, and the financials that one, x. l.f., concerning emerging markets, concerns about europe and greece at all here, jim? >> i think those are short-term concerns, but i don't think they're going to wag the dog long-term. we are clearly in the second consecutive global economy being led by the emerging global economies. i think that leadership is going to continue. it implies, like the last recovery cycle in the stock market, it is going to be led again by emerging stocks. what i like about this is they did well off the lows of march of '09, but they've been marking time for the overall market for much of the last year. i think after this period of consolidationrs i consolidata good entry point. >> tom: any concern about regulatory reform in the financials, and the cost of doing business? >> what i like there is if anything, those concerns have held these stocks below fundamental values. we have clearly recapitalized the
financial industry. the chargeoff rates on bad loans has peeke peaked in this industry are is starting to come off. there are very wide lending spreads, and i think we'll see a return of loan demands. >> tom: jim, any disclosures for these sectors? >> certainly some of these sectors we own for our clients. i don't own any personally. >> tom: james paulsen, chief investment banker. >> suzanne: it's called "reputational risk," a company's image on the line in tough circumstances. take for example, the tarnishing of the tiger woods brand. since human nature causes headaches in corporate america, some firms are looking for alternatives. with tongue planted firmly in cheek, here's tonight's funny money. >> someone to represent your company? tired of dealing with the public relations nightmare of real live humans. let us create a blatently obvious or terribly random spokes creature. it's so easy. here are a few contenders. how about sleepy, the
overnight delivery slut because nobody really cares if you're package ar arrives by 2. octo, the government -- wait, octo the tax collectors. he has enough hands to reach into all of your pockets. itchy the bedbug, who is itching to find you the best rate. when you don't have enough to read the fine print, take it to wally, the prime weasel. maybe hiring the real celebrity is easier after all. good luck. >> tom, my kids want a new pet. now i have new ideas. >> spokes creatures, yeah, we'll leave it there. >> that is "nightly business report" for friday, april 30th. i'm suzanne pratt, good night, and have a great weekend. >> you, too, suzanne. i'm tom hudson, and we hope to see you here next week. "nightly business report" is made possible by: